Energy Policy

Endless energy? Does energy efficiency lead to greater energy use? Is wasted energy inherently bad? What are the consequences of reaching peak oil production? Provocative author Peter Huber joins OnPoint to discuss these and other issues he addresses in his latest book, "The Bottomless Well: The Twilight Of Fuel, The Virtue Of Waste, And Why We Will Never Run Out Of Energy."

Transcript

David Leavitt: Peter Huber, thank you for joining us here today.

Peter Huber: Thanks.

David Leavitt: Pretty provocative book here. You say that energy efficiency leads to more consumption not less, and you say waste is virtuous. Can you explain what you mean by that?

Peter Huber: Well, in which order shall we take them? Efficiency is a wonderful thing. I'm in favor of it, everybody should be, but to suppose that it will cut our energy consumption over the long-term is fallacious.

David Leavitt: Right, you sort of talk, you and Mark Mills co-wrote this book, you sort of talk about how as you have more efficient technology it creates demand for new things that you didn't have before, so eventually the consumption goes up.

Peter Huber: Yes, that's been the dynamic. You can't name a car engine, an appliance, a dishwasher, a refrigerator, a washing machine that hasn't grown substantially more efficient over the last two decades or you can trace them back for two centuries of industrial history. All our engines get more efficient, and we keep using more energy not less. There's a message in there.

David Leavitt: So where do you make the next step, which is that line, "waste is virtuous"? What do you mean by that?

Peter Huber: Nobody's suggesting, certainly not us, that you ought to just leave the lights on, leave the SUV idling in the driveway and walk away. I mean, that's not the form of waste we're talking about, but take a concrete example. If you check in for laser surgery tomorrow morning, what's going into your eye is a pure beam of energy, no more, no less. It's a laser light. To get from say a lump of coal 50 miles away to that beam, you actually discard something like 95 percent of all the raw energy in that coal. I mean, why? Is it because we just like to discard? No, it takes a great deal of energy to purify and refine energy from rather crude forms to these very pure forms that we find so valuable and in that sense, using all that energy to purify energy itself, commonly described as waste, is a good thing because you end up with a higher quality product at the end that's worth much more and that lets us do much more.

David Leavitt: Do you think it's possible we're approaching peak oil, this idea that, you know, the proven reserves are sort of dwindling and everything or does it not even matter?

Peter Huber: Well there is a mix of words here. You know, proven reserves, what the companies have on their books at any given time --

David Leavitt: We've certainly seen how companies are now backtracking on what they say they have.

Peter Huber: These records go up and down, OK? What a company has explored for last year is an interesting and important thing. The long-term trends really are unambiguous. These oil fields have been repeatedly projected to run dry for a century or more, OK? Twenty years ago all the projections of the 1970's said we would be rock dry by now and we're nowhere near that. So this peak, which is always, it seems, just over the horizon, it has yet to be reached. Nothing's impossible, but even if particular wells run dry, I mean our supplies, our total supplies of varied hydrocarbons are enormous, I mean, just gigantic.

David Leavitt: So does it sort of not even matter whether or not we're at that level?

Peter Huber: Over the short term it matters a great deal. You can get all sorts of fluctuations in price and with political instability in the Middle East, these can be very disruptive effects, but the notion that the planet itself is going to curtail our consumption of energy, I think, is quite mistaken.

David Leavitt: That sort of goes into what I wanted to ask you next. You talk about how the law of thermodynamics, talking about how energy can't be destroyed. We just have to sort of figure out new technologies and ways to extract the matter to make it into a sort of realistic energy supply. If that's our long-term outlook, what can we be doing right now? Of course, there's this debate right now on Capitol Hill over the energy bill. There's also this debate now about ANWR and this is coming up, this is good timing for this discussion, you know, what do we make of that?

Peter Huber: Well, I think you can actually recognize two principal policy objectives we should have. First of all, electrification. The rising dominant source of energy at the front end of our economy today is not oil it's electricity. Most of the growth of our demand for energy total has been demand, growing demand for electricity, which is the key fuel, if you will, at the front end of the fastest growth sectors of our economy, at telecom and digital technologies, in fact, all of the digital world, everything that runs on silicon runs on electricity. We should encourage this electrification trend. There's a convergence now of the thermal and the electrical sectors. We're doing more and more of our heating with microwaves and lasers and electric welders and so on. That's a very positive trend.

David Leavitt: I'm sorry, when you say encourage it, do you mean government involvement or what kind of encouragement can we be doing?

Peter Huber: Well, by and large, it's not a matter of massive government programs. It's recognizing that these are the trends. Most importantly, these are the trends in the transportation sector. As we move toward hybrid electric cars we then build an infrastructure that can be recharged off the grid opportunistically. We're not going to full electric cars anytime in our lifetimes, but we can get, at the margin, we can recharge off the grid as this infrastructure gets built. How do you encourage this? You have interfaces. You encourage the industry to build out an infrastructure that allows the grid in the transportation sectors to merge. We're not talking massive subsidies here. Now, that doesn't mean the oil economy goes away. Of course we still have an oil economy and on that front we should encourage investment in politically stable oil producing nations, North America and others.

David Leavitt: Is this ANWR debate right now, is this really relevant? The Bush administration's pushing pretty hard for this as sort of an answer and they talk a lot about what we need to relieve our energy dependence. Is that possible and is that possible through ANWR?

Peter Huber: Oil is much too big for any one well anywhere ever to be the answer, but it is equally fallacious to say, all right, no one well as ever big enough. Therefore, we don't have to drill any of them. The oil reserves in ANWR at the margin, they're certainly in a politically stable area of the world, which is an important value in itself and at the margin of course they'll contribute. You can say this, unfortunately you can say this about any well, well we don't need that one, we don't need that one, we don't need the next one. At the end of the day then, you'll be getting all of your oil from places where you probably don't want to get it from.

David Leavitt: To that end, another area where you could get it from, people are saying now that there's a lot of reserves off the coast of Cuba and of course, U.S. companies are forbidden from investing in exploration there. Is there a policy change that needs to happen there or is this another example of --

Peter Huber: Look, each one of these is an interesting and important political question in itself, but the one political reality that, I think, you simply have to come to grips with first is the U.S. public will not tolerate the endless gas lines that we saw in the '70s. The oil will come from somewhere at some price and we have to think systematically. Do we want to buy it? Do we want to channel $40 billion or so of our money into the Mideast which has problems of its own? Are we better off getting some of it in Alaska? Should we hope to make our peace with Cuba? How about the gulf? You know, do we want to look back at areas of the southern United States where we stopped drilling entirely for environmental reasons? There are hard choices to be made. We cannot live under illusions that some magical techno-fix in Detroit will simply curb our appetite for oil, it won't.

David Leavitt: I'll read you a quote from the book here, it says, or you said that, "The competitive advantage in manufacturing is now swinging back, decisively, towards the United States." We certainly hear a lot about the U.S. automakers and how they're going at it with Japan over hybrid technology. What do you make of China given that the cheap coal there is really making the manufacturing industry just explode? Do we have such an advantage going forward?

Peter Huber: Well, China has got cheap coal. They're building massive hydro projects. Their Three Gorges project is about 18 gigawatts, I think that's about nine Hoover Dams worth. It's just one large project there. They are certainly pushing down their energy prices by importing Western technologies, by and large, and not being very careful at all about environmental aspects. Energy is a very core input in manufacturing. If we keep our energy prices reasonably low and then exploit our tremendous ability to develop these energy transforming technologies that boost labor productivity so much, we can compete with China. If we stay stagnant in our energy technologies and let our energy prices go up and up, we cannot compete against these countries.

David Leavitt: You talk a lot about climate change and with that you sort of go into carbon sinks. Do you see that as really the long-term? As the carbon dioxide outputs continue to increase, is that really a long-term answer for absorbing emissions?

Peter Huber: Look, there are a couple of realities to come to grips with first. The environmental disaster on the planet is not the United States or North America. It's the developing world today where they're still largely locked in, not into a hydrocarbon economy, but a carbohydrate economy. They're still living off the land. They're deforesting. This has enormous consequences for carbon emissions and for environmental damage generally. The best thing we can do for the developing world is actually migrate them along the same path we moved 50 and 100 years ago. Get them off the carbohydrate economy to a hydrocarbon economy. Can we do better than we're doing? Yes, of course. I think that choice is largely a choice for the traditional green community, because we know how to generate electricity with a very carbon rich fuel, which is coal, and we know how to generate it with non-carbon fuels as well, uranium in particular. All right? I think the green community is going to have to get real about this. We're not going to generate 11 gigawatts of power for New York City in the middle of summer with windmills and solar any time in the foreseeable future. So you've got two basic choices and those are the two core choices across the United States, and we should come to grips with them and make intelligent choices.

David Leavitt: Another battle that you sort of hint at a little bit, is you're talking about the blackout of 2003 and you sort of say that you generate so much electricity just getting the power from the plant to be people and that the electricity grid could be improved if you put the power plants closer to where people live. Now obviously, you're going to get a lot of resistance from people who don't want a power plant in their backyard. I'm not sure how local governments or even Congress will sort of address an issue like that. How do you see that playing out?

Peter Huber: Well, the losses, the power losses in the grid are actually not that great. The grid is very efficient in many ways. There's a reliability issue. The longer your grid, the further you're moving your power, the more vulnerable the whole system is to interruptions. Certainly for the critical power locations that matter the most, you have to get power in close. That's why we have so many diesel generators sets scattered all over, just for backup power. Natural gas lets you bring your power plants in closer because it's environmentally friendly, but you then have the natural gas pipelines that are vulnerable. Once again, it's not an easy balance, but the notion that you can always ship your power further and further away is a mistake. It has real costs, in terms of reliability, that we have to address.

David Leavitt: I'll read you another quote from the book here. "If energy policies similar to ours can be implemented worldwide our grandchildren will inhabit a planet with less pollution." That's the end of the quote. How would it play out if the Bush administration went forward and made a claim like that?

Peter Huber: I think you paraphrased my language a little bit, but that's all right. Look, the transformation in the United States, in North America, over the last 80 years, the environmental transformation, is astonishing and very positive. We have been massively reforesting our continent because we have moved away from fuels that essentially gather the energy from the surface by deforesting, by having pasture for horses, by having disbursed farms in close to our cities. We've moved toward a hydrocarbon economy, great shrinkage in the area of our farming, a much more efficient transportation system lets us bring food from much more efficient farms everywhere. This has been an environmental triumph for North America and if they, if the rest of the world or the developing world is not on this trajectory, we should help them make this same transition. If you want to reforest in South America or stop the deforestation, and the same in the subcontinent and in Asia, you have to move them off the carbohydrate economy. That is the environmental disaster.

David Leavitt: OK. I'll sort of ask my final question here. What's one major thing that could damage the sort of positive long-term view of energy supplies in the state of the American economy?

Peter Huber: Well there's nothing that can cause damage as fast as political stupidity. If we freeze our grid in place and we are sufficiently foolish about dreaming on alternatives that will suddenly materialize to give us magically free and clean power, we will very likely end up burning more coal and still more coal. It's not a particularly attractive fuel. It has environmental aspects. There will be political fights on that. It's possible, politically, to be so foolish that you mess things up, but I don't see any signs of that at the moment.

David Leavitt: OK. Well, thanks a lot for coming on the show. I'm David Leavitt. Join us tomorrow for another episode of OnPoint.